He says the economic contraction will keep inflation well below the mid-point target.

The bank has now forecast growth to contract at 7.1% this year.

Schultz says, “This decision underpins their caution and not going with a bigger cut today (Thursday). I think they will remain data dependent. If we see more evidence of downside inflation, I think the central bank will continue to ease policy.”

Director at Merchant Afrika, Lavan Gopaul, says the markets were anticipating a further reduction of the interest rate.

Gopaul says, “While the markets were anticipating a further reduction in the interest rate, they had expected a much larger increase today (Thursday). You saw the markets build on this price and keeping the rand trading at a much weaker level. Whilst the market digested that we might see a much smaller cut, you saw an immediate dash for currency and there was demand for the rand, dipping below that R18 to a dollar level. So all in all, we are seeing a stronger currency because the interest rate didn’t drop as much as the markets expected.”